Search form

The open secret in banking – artificial intelligence will lock in more customers

Matt West

The open secret in banking – artificial intelligence will lock in more customers

22.03.2018 12:00 pm

In retail banking there are many areas where regulation and competition is now very fierce.

The entry into the market of challenger banks and fintechs has increased the pressures immensely, offering exciting new ways of providing services and engaging with customers. Everyone realises that today’s consumers have far greater expectations and far wider choice of providers. Younger consumers especially want technological innovation that makes their lives easier and boosts personalisation, cutting out many of the traditional form-filling aspects of banking and borrowing.

For established institutions this is not easy, given the well-known difficulties of implementing new technology on top of disjointed legacy systems. Now everyone in retail banking also has to cope with the advent of the CMA’s Open Banking revolution and its requirements for much more sophisticated used of technology in customer-engagement.

AI is the biggest trend around

The financial sector has already begun devoting time and substantial sums of money to artificial intelligence (AI), transforming market-trading, risk-assessment and fraud-detection. Analysts at IDC calculate that last year the global banking sector spent $1.5 billion on AI as part of a trend in which annual spending across all industries on the technology will reach $47 billion by 2020. In June this year, PwC estimated that British GDP will increase by 10 per cent by 2030 as a result of AI implementation.

Customer-service is now the big frontier and it is here that AI offers banks and lenders huge advantages in personalisation, efficiency and cost-reduction. Analysts at Gartner, for example, have forecasted that more than 85 per cent of customer interactions will be managed without a human by 2020.

Positive attitudes are not matched by resources

It may therefore, seem encouraging that in research conducted by Feefo, more than nine-out-of-ten IT decision-makers in financial services recognised that failure to implement AI would be a commercial disaster.

Some 71 per cent said they will use the technology in customer-engagement, with the same percentage opting specifically for customer-service chatbots. And more than four-in-ten financial organisations envisaged using AI to provide personalised summaries of reviews.

But there is a substantial problem. The research revealed that little more than a fifth of the financial sector’s IT decision-makers (21 per cent) believe their organisation has the capacity and expertise to develop AI initiatives.

Ready-made solutions

In reality however, this is no barrier to immediate implementation. Out-of-the-box solutions can already circumvent any shortage of expertise and reduce the need for costly recruitment, providing full AI functionality on a plug-in-and-play model that integrates with current systems.

Many brands already use chatbots to engage with customers seeking support or more information. Banks and insurers, with their intimate knowledge of each customer, are ideally placed to implement chatbots to recommend financial products or services in the same way H&M’s Kik app recommends outfits to shoppers based on the style of clothes they prefer.

AI solutions, with their predictive capabilities, can also head off potential problems before they develop, learning to detect the ‘distress’ signals and react with the right information such as a FAQ pop-up or a virtual assistant chat window. Review systems are also crucially important in swaying undecided consumers to become customers. AI in this context is a hugely powerful tool that allows for fast filtering, reducing swathes of comments into an easily-understood summary on what interests the individual consumer.

AI is the most effective technology to meet the requirements of the under-35s

AI will not simply meet the customer-service demands of today’s consumers, reducing the very substantial cost of call centres and freeing their staff from repetitive duties, it will also improve loyalty among the under-35s, who are very different from their parents.

This generation wants to engage with banks, lenders, insurers and mortgage-providers in more meaningful ways – preferably using a mobile device. Our own research found that while the under-35s regard themselves as loyal, more than six-out-of-ten see themselves switching primary providers more often in future and nearly nine-in-ten thought banks should be doing more to keep them as customers.

They especially expect customer-facing technology that makes interaction easier and increases personalisation. Personalisation is certainly the key to winning custom now, rather than making customers feel they are just numbers on a sales sheet.

AI-powered review systems will be highly influential

Which brings us to reviews again. Our research was definitive in demonstrating the primary role of reviews in determining what consumers think of products, services and organisations. We found that access to positive feedback from fellow customers in genuine reviews is the single most influential factor when consumers under 35 decide which bank, lender or financial service to opt for (selected by 85 per cent). This was even more important than verbal recommendations from friends and family (82 per cent).

The implementation of AI-powered review systems offers these consumers the highly personalised information they want when making important financial decisions. They can rapidly drill down into the topics that interest them, enabling them to come to decisions faster and with greater confidence.

Chatbots, virtual assistants and personalised review summaries are AI technologies that are fit for purpose now, given the ease with which off-the-shelf solutions can be integrated. Any retail financial business must embrace them or it will be its competitors that attract the rising generations of customers who expect technological innovation as a matter of routine.

Latest blogs

As you probably remember, Bitcoin was the big news headlines and the dinner table talk of a year ago. As crypto-currencies soared in value, it was rightly the dominant topic of conversation. Crypto-currencies had advanced in value quite dramatically Read more »

Settling LSTA distressed loan trades in the secondary market is complex and time-consuming. Unlike the par loan market, distressed features additional requirements for inventory management, due diligence and documentation. As a result, the average Read more »

"Ninety percent of what we see today won’t exist in 10 years’ time, but 10 percent of it will change the world" - Chris Larsen, Ripple's CEO.
This statement might be the summary of it all. The world is constantly changing, and with this change, new Read more »

Successful compliance and risk management programmes within financial institutions depend on effective Know Your Customer (KYC) processes yet most have found these processes to be increasingly onerous, both in terms of time and cost. This is Read more »

No one wants to be unsatisfied with a product after paying for it. For some consumers, a free-trial is a great way to test out a new product and get comfortable with it before making a purchasing decision. And with so many merchants offering free Read more »